Diageo Opposes Tax Increase on Flavored Beer Adopted in California

Diageo vigorously opposed the huge tax increase and said it will join the Flavored Malt Beverage Coalition in challenging the Board of Equalization's right to levy higher taxes without legislative authority.

20/06/08 The Office of Administrative Law allowed the adoption of a 1600 percent tax increase on flavored beer by the California Board of Equalization today that flies in the face of the state constitution and public opinion, says Diageo, the world's leading spirits, wine and beer company.

Diageo, maker of several flavored beers sold in the California market, vigorously opposed the huge tax increase and said it will join the Flavored Malt Beverage Coalition in challenging the Board of Equalization's right to levy higher taxes without legislative authority.

“Decisions about raising taxes on flavored beer are the responsibility of the Legislature, not three politicians on the Board of Equalization,” said Amy Elliott, Senior Director State Government Affairs, Diageo North America. "Diageo has no choice but to file a lawsuit to ensure that taxpayers and consumers are protected and that the law is enforced properly.  Not only does it hurt adult consumers and more than 35,000 small businesses across California, but it also misleads the public to think raising taxes on a consumer product will combat the very serious problem of underage drinking,” continued Elliott.

The decision to reclassify flavored beer – which is malt based just like regular beer and regulated by the Federal Government as a malt beverage – as a distilled spirit for tax purposes, is based on the erroneous notion that taxing flavored beer, which is less than 3% of all the beer consumed in California, will curb the problem of underage drinking.

Research conducted by The Century Council, a not-for-profit organization dedicated to fighting drunk driving and underage drinking, found that adults are the largest providers of alcohol for underage drinkers. Sixty-five percent of underage drinkers get their alcohol from family and adult friends. Furthermore, polling research conducted by Diageo concluded that vast groups of California citizens do not agree that taxing flavored beer would curb underage drinking. 

“The serious problem of underage drinking facing our country requires real solutions that will tackle the problem head-on. Education and enforcement of existing laws should be the state’s priority – not a fast tax grab that merely punishes law abiding consumers and skirts the tough questions about responsibility,” Guy L. Smith, Executive Vice President, Diageo North America. "That's why Diageo has supported and will continue to support bills in the Legislature that have a real impact on keeping alcohol out of the hands of kids."

"The anti-alcohol advocates have foisted a tax increase on law-abiding Californians at a time when our economy is struggling and sleight-of-hand tax increases are not helpful to everyday consumers. Tax increases are the sole purview of the members of the Legislature, not obscure politicians," Smith added. 

Leading the industry in social responsibility, Diageo adheres to a voluntary marketing code that is one of the most stringent in the industry. Diageo is a founding member and major supporter of The Century Council, an organization funded by the country's leading distillers committed to developing programs to combat drunk driving and underage drinking.